Chinese stocks in the U.S. advanced, led by China Life Insurance Co., on the prospect policy makers will allow banks to boost lending to help avert a slowdown in Asia’s fastest growing economy.
The Bloomberg China-US 55 Index of the most-traded Chinese stocks in the U.S. rose 0.5 percent to a two-month high of 101.22 yesterday in New York. China Life, the nation’s biggest insurer, rose to a one-month high as Goldman Sachs Group Inc. named it a “long-term winner.” New Oriental Education & Technology Group Inc. rebounded from yesterday’s 11 percent slump on speculation the drop was excessive.
China’s central bank will let the nation’s five biggest banks increase first-quarter lending by as much as 5 percent from a year earlier, according to two people at state banks with knowledge of the matter, declining to be named because the move hasn’t been announced. Economic growth decelerated to the slowest pace in 10 quarters in the three months to Dec. 31 as Europe’s debt crisis curbed export demand.
“Even small policy moves in China would be interpreted very positively” by investors, said Jeff Papp, a senior analyst in Lisle, Illinois at Oberweis Asset Management Inc., which helps invest $700 million in China. “More and more data this year confirms that they have the ability now to make some moves, so you’ve probably seen some people try to front run those moves.”
The People’s Bank of China reduced the amount banks must set aside as reserves by 50 basis points, or 0.5 percentage point, in December to 21 percent and hasn’t moved the nation’s lending rate since July, when it was lifted to 6.56 percent amid quickening inflation.
The Shanghai Composite Index dropped 1.4 percent to 2,266.38 yesterday, after climbing the most since October 2009 on Jan. 17. The Standard & Poor’s 500 Index gained 1.1 percent to 1,308.04 after the International Monetary Fund said that it plans to raise as much as $500 billion in lending to insulate the global economy against a worsening of Europe’s woes and a worldwide slowdown.
China’s “small easing steps are going to continue,” Tian Hou, chief executive officer of T.H. Capital LLC in Beijing, said in an interview with Bloomberg Radio yesterday. “From the trend point of view, the stock market will go up this year.”
American depositary receipts of Beijing-based China Life climbed 4.8 percent to $41.51, the highest level since Dec. 7. Goldman Sachs analyst Nick Hartley said the company was one of 33 “long-term winners” among global equities that offer attractive entry points. The stock has risen 12 percent this year after a 40 percent slump in 2011.
Chinese ETF Climbs
Three analysts maintained “buy” or “hold” recommendations on China Life yesterday, while Credit Suisse Group AG downgraded the company to “neutral.” The insurer’s income from premiums in 2011 was 318.3 billion yuan ($50.4 billion), according to a regulatory filing on Jan. 17, compared with 318.2 billion yuan in 2010.
The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the U.S., advanced 1.9 percent to $38.32, the highest level since Nov. 8. The yuan was little changed at 6.3120 per dollar yesterday, according to the China Foreign Exchange Trade System.
New Oriental, China’s largest private education service provider, jumped 7.7 percent to $24.09. The company’s U.S.- traded stock slid to the lowest level since October on Jan. 17 as a sales forecast for the quarter ended in February 2012 missed analysts’ estimates.
‘A Bit Overdone’
Four strategists reiterated their “buy” or “outperform” recommendations on New Oriental stock yesterday while two maintained “hold” or “neutral” ratings.
The decline in the share price after the earnings report “is a bit overdone,” C. Ming Zhao, an equity analyst at Susquehanna International Group LLP in Boston, wrote in a Jan. 17 research note.
ADRs of Aluminum Corp. of China, the nation’s biggest maker of the metal, traded 2.3 percent higher than the share price in Hong Kong, the biggest premium since Dec. 22, according to data compiled by Bloomberg. The stock rose 1.6 percent to $12.52 in New York, taking the advance over the last six trading days to 16 percent.
“Further central bank coordination could ultimately alleviate concerns about economic failure in Europe,” which is bullish for metals, a report by Bloomberg Industries said yesterday. Additional monetary policy easing in China may also help boost business confidence and visibility, the report said.
Suntech Power Holdings Co., the biggest solar-panel maker, surged 15 percent to a four-month high of $3.70.
Chinese solar-module makers enjoy “offensive, unlimited state financing,” Germany’s Environment Minister Norbert Roettgen said yesterday at a conference in Berlin. That support may be designed to “drive out German companies as competitors to reach a technology leadership or even a technology monopoly.”
China plans to develop three gigawatts of solar capacity this year, double its existing capacity, the National Energy Administration said on Jan. 11. on its website.